q17 Iaetrfcnrfc Ans

 

1. ABC Corp., a domestic corp. is on its 7th year of operations when it was assessed by the BIR for improperly accumulated accumulat ed profits. Gross income Business Expense NOLCO Prior Years Dividend Income Phil Gross Interest Income - from bank

2,000,000 1,400,000 500,000 30,000 50,000

Gain on sale of Phil stocks directly to buyer Gain on sale of land classified as capital asset (Selling price = P2M; Fair Market Value = P2.5M) Dividends declared Appropriation for Treasury Stock Appropriation for Plant Expansion

200,000 500,000 100,000 50,000 150,000

Compute for the Improperly Accumulated Earnings Tax. Provide the step by step process. (11 points) Gross income Less: Business Expense Less: NOLCO Prior Years Taxable Income RCIT (100K * 30%) MCIT (2M * 2%) Less: Income Tax paid for the year - MCIT Add: NOLCO Prior Years Add: Exempt Dividend Income Domestic Add: income subject to final tax Interest Income from bank net of tax (50K - 20%tax) Gain on sale Phil stocks net of tax (200K - 15% tax) Gain on sale of land net of tax (500K - 2.5M * 6%) Less: Dividends Declared Less: Appropriation for Treasury Stock Less: Appropriation for Plant Expansion Improperly Accumulated Earnings IAET Rate Improperly Accumulated Earnings Tax

2,000,000 -1,400,000 -500,000 100,000

1

-40,000 500,000 30,000

2 3 4

40,000 170,000 350,000 -100,000 -50,000 -150,000

5 6 7 8 9 10

850,000 10% 85,000

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30,000 40,000

2. A branch of a foreign corporation engaged in wholesale of imported goods had the following income details: Gross income from sale of goods Business Expenses Gain on sale of fully depreciated properties Dividend Income Phil Capital gain on sale of non-traded stock, net of tax

4,000,000 3,600,000 400,000 50,000 90,000

Compute for the branch remittance tax if the branch earmarked 50% of the total net profits for remittance to the home office in the USA. (3 points)

 

Gross income from sale of goods Less: Business Expenses Add: Gain on sale of fully depreciated properties Taxable Income Less: Income Tax Due - RCIT Net Income Portion Remitted (50%) Branch remittance tax (280K * 15%)

4,000,000 -3,600,000 400,000 800,000 -240,000 560,000 280,000 42,000

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***Dividend Income and Capital gain on sale of non-traded stock are excluded from remittance tax base because such INCOME/CAP.GAINS INCOME/CAP.GAINS are NOT EFFECTIVELY CONNECTED WITH THE BUSINESS OF THE TAXPAYER, per SEC. 28(A)(5) 3. Eva Air, a resident foreign air carrier, reported the following summarized results of its Philippine operations during the quarter: Gross Receipts Direct Expenses Other Common Expenses Net Income

Inbound flights 9,000,000 5,000,000

Outbound flights 8,000,000 4,000,000

Total 17,000,000 -9,000,000 -2,000,000 6,000,000

How much income tax shall Eva Air pay? (1 point) Gross Receipts (Outbound) Multiply by Income Tax Rate (for Gross Phil Billings) Income Tax Due 4. Philex Mining, a domestic corporation, rented specialized mining equipment equipment from abroa abroad. d. The non-resident non-resident foreign corporation lessor billed Philex the following amounts in peso equivalents. Equipment Rental Set-up and training fee Initial Service and Maintenance Fee Interest on rent in arrears

8,000,000 2.50% 200,000

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10,000,000 1,000,000 500,000 50,000

Compute for the total final tax to be withheld by Philex Mining from the NRFC. (1 point) Equipment Rental Set-up and training fee Initial Service and Maintenance Fee Interest on rent in arrears Total Final Withholding Tax

10,000,000 * 7.5% 1,000,000 * 7.5% 500,000 * 7.5% 50,000 * 30%

750,000 75,000 37,500 15,000 877,500

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